COMMNR. OF INCOME TAX, MUMBAI vs. M/S. GENERAL INSURANCE CORPN.OF INDIA

C.A. No.-004422-004422 - 2001Supreme Court25 September 20067 pages
For Respondent: RUSTOM B. HATHIKHANAWALA
AI SummaryAllowed

What did the Supreme Court hold?

The Supreme Court held that expenditure incurred in connection with the issuance of bonus shares is revenue expenditure. It reasoned that issuing bonus shares is merely a reallocation of existing funds and does not result in an inflow of fresh capital or an enduring benefit to the company.

What were the facts?

The assessee, an insurance company, incurred expenditure towards stamp duty and registration fees for increasing its authorized share capital and issuing bonus shares. The Assessing Officer disallowed these expenses as capital expenditure.

What were the issues?

Whether expenditure incurred on the issuance of bonus shares is capital or revenue expenditure. Whether the issuance of bonus shares confers an enduring benefit on the company.

Which sections of the Income-tax Act were involved?

Section 143(3),Section 260-A

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Cause title — parties, addresses and appearances
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 1 of 7 CASE NO.: Appeal (civil) 4422 of 2001 PETITIONER: Commissioner of Income Tax, Mumbai RESPONDENT: M/s General Insurance Corporation DATE OF JUDGMENT: 25/09/2006 BENCH: ASHOK BHAN & Markandey Katju

JUDGMENT: J U D G M E N T Bhan, J. The question which arises for consideration in this appeal is, as to whether the expenditure incurred in connection with the issuance of bonus shares is a capital expenditure or revenue expenditure. The question of law framed in the High Court was: (i) Whether on the facts and in the circumstances of the case and in law the Tribunal was right in holding that the expenditure incurred on account of share issue is allowable expenditure?

The Assessee is an Insurance Company which has four subsidiaries. For the assessment year 1991-92 the assessee filed a return of income of Rs. 58,52,80,850/- along with the audit report. The assessing Officer disallowed a few expenses incurred as revenue expenditure, one of them being in the sum of Rs. 1,04,28,500/- incurred towards the stamp duty and registration fees paid in connection with the increase in authorized share capit

The order continues below.

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